Sign of the Times

15 October 2008



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Iceland Asks Russia for a Loan

Iceland is in some financial trouble. Its currency has fallen relative to the euro by about 25%, making imports more expensive than they already were. It has had to nationalize a bank or two. It has had to close its stock market, and when it allowed trading to resume yesterday, the OMX Iceland 15 index plummeted 2,326 points to 678, shedding 77% of its value. So, to help things along Iceland has sent a delegation to a large nation to negotiate a loan, to Russia.

RIA Novosti reports, “Iceland's Central Bank said on October 7 that Russia had agreed to grant it a 4 billion euro loan. Finance Minister Alexei Kudrin said Russia treated Iceland's loan request favorably, but that a decision on whether to grant the loan would only be made after negotiations.” It added that a spokesman for the Russian Finance Ministry had confirmed that the negotiations were underway.

Iceland, a member of the NATO alliance, has decided it would rather borrow the money from the Russians than from the Americans or the British. Iceland wants a €4 billion loan for a 3-4 year period at about half a percentage point above LIBOR. It’s a reasonable request. It’s not like the US can’t find that kind of change for an ally; indeed, the US Treasury just coughed up $250 billion for 9 banks.

Iceland isn’t about to become a satellite of a revived Soviet Union by this loan. Indeed, it has other pals in the world. Iceland’s central bank said it drew €400 million euros in accordance with a mid-May agreement it made with the central banks of Sweden, Norway and Denmark. This agreement allows Iceland to draw on as much as €500 million to stabilize its currency if need be.

On the other hand, the delegation in Russia is a watershed moment in history. What this says is the American Era is largely a thing of the past. The country will continue to be a military and economic powerhouse for years to come. However, the image of the US as the richest, freest, greatest country is not in the minds of non-Americans as much as “the pitiful, helpless giant” President Nixon feared it might become.

© Copyright 2008 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Fedora Linux.

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